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Why PR pros should care about declining trust in CEOs
2015-09-06

Falling trust in CEOs is a growing public relations problem with heavy consequences.


“Executives estimate that 44% of their company’s market value is attributable to the reputation of their CEO,” according to the study the CEO Reputation Premium by Weber Shandwick. The study also shows half of executives expect that CEO reputation will matter more to a company’s reputation in the next few years.


The rate of falling trust in CEOs has increased even as public relations and communications departments have become further integrated into company’s corporate structure. Here’s why that should matter to the average PR pro:


Falling trust affects company value


According to the Weber Shandwick study:


Executives report significant benefits that accrue from positive CEO reputation including attracting investors (87%), positive media attention (83%), and crisis protection (83%). Strong CEO reputation also attracts (77%) and retains (70%) employees.


Edelman’s Trust Barometer Study adds this tidbit: “For the first (2015) time since the end of The Great Recession, trust in business faltered, signaling the finale of an era of recovery for business.”


Falling trust in leadership is one cause for the drop in trust. Edelman’s study found that people believe experts and normal employees twice as much as they do CEOs. This is problematic because the CEO is the most public face of the company.


Why trust is falling


One would expect with the increased integration of public relations and communications personnel into the corporate fold, the reputation of a company’s most important political figure would be increasing in credibility. Instead the opposite is the case.


Why? While public relations officials’ reputation in terms of importance to the company has increased, it hasn’t increased fast enough to compensate for the growing importance of reputation management. The expertise of public relations officials is often underestimated and they are often left out of the loop.


“Since 2008, operations has actually moved down the list of importance. Companies still do it well, and they still make money, they still have respected CEOs. But the new gold is actually in engagement and integrity,” says Richard Edelman.


Traditionally, CEOs have only had to engage with other high-level executives. Today, CEOs are expected to engage with executives, workers unions, the press, the public, and more. While the ability to directly influence the company’s story can potentially be an opportunity for CEOs, it can also be something of a trap.


In 2010, BP CEO, Tony Hayward made international headlines when his response to the Gulf of Mexico oil spill was, “There's no one who wants this thing over more than I do. I'd like my life back.” While the sentiment may have been true, it was widely considered inappropriate by both the public and the press that reported it. The comment would largely come to define the way the public viewed Hayward and BP.


The CEO is the leader and chief of a corporation, which means that if he or she is to be led, it must be from the bottom. Unfortunately, many corporate structures do not allow for leadership from the bottom. Consequently, CEOs are robbed of the full talents of their staff, who are often equipped with skills they lack.


Finding a solution


CEOs should first acknowledge and address their organizations’ internal communications problems. There are staff with communications training, so they should ask why their expertise is not being accessed by CEOs. The answer is status deference—keeping quiet to please someone at a higher status than you—and the tendency for those with less power to defer decision making to those with more.


While status deference is an important and needed part of the corporate structure, it must be managed as to not hurt the company. It is up to the CEO to create a culture where need for advisement doesn’t hurt one’s status as a leader. Once this is the case, both leaders as well as advisers will feel more comfortable sharing their knowledge.

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Vivian Li

PR Manager

Tel: +86 010 8390 7451

Mobile: +86 13041030670